Correlation Between National Atomic and Telecom Italia

Can any of the company-specific risk be diversified away by investing in both National Atomic and Telecom Italia at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining National Atomic and Telecom Italia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between National Atomic Co and Telecom Italia SpA, you can compare the effects of market volatilities on National Atomic and Telecom Italia and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in National Atomic with a short position of Telecom Italia. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Atomic and Telecom Italia.

Diversification Opportunities for National Atomic and Telecom Italia

0.03

Correlation Coefficient

National Atomic  Telecom Italia

Significant diversification

The 3 months correlation between National and Telecom is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding National Atomic Co and Telecom Italia SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telecom Italia SpA and National Atomic is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on National Atomic Co are associated (or correlated) with Telecom Italia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telecom Italia SpA has no effect on the direction of National Atomic i.e., National Atomic and Telecom Italia go up and down completely randomly.

Pair Corralation between National Atomic and Telecom Italia

Assuming the 90 days trading horizon National Atomic Co is expected to under-perform the Telecom Italia. But the stock apears to be less risky and, when comparing its historical volatility, National Atomic Co is 1.33 times less risky than Telecom Italia. The stock trades about -0.04 of its potential returns per unit of risk. The Telecom Italia SpA is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  29.00  in Telecom Italia SpA on December 25, 2024 and sell it today you would earn a total of  5.00  from holding Telecom Italia SpA or generate 17.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

National Atomic Co  vs.  Telecom Italia SpA

National Atomic

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Atomic Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, National Atomic is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Telecom Italia SpA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Telecom Italia SpA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Telecom Italia unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Atomic and Telecom Italia

The main advantage of trading using opposite National Atomic and Telecom Italia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Atomic position performs unexpectedly, Telecom Italia can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Telecom Italia will offset losses from the drop in Telecom Italia's long position.

The idea behind National Atomic Co and Telecom Italia SpA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.